The Basic Conditions of Employment Act Earnings Threshold has been increased with effect from 1 March 2021, in terms of a notice published in the Government Gazette by the Minister of Employment and Labour.
The threshold will increase to R211 596.30 per annum, representing an increase of around R6 000 from the previous earnings threshold of R205 433.30. The previous earnings threshold was revised over six years ago, and it may surprise some that the increase is relatively small (under 3%), rather than being more closely aligned to the inflationary increases over the years.
In calculating this threshold, one takes into account the regular annual remuneration of an employee before deductions for the following items:
- tax
- medical aid
- pension and retirement fund contributions
- payments similar to the above
The calculation, however, excludes similar benefit contributions made by the employer (for instance, if the employer contributes an amount to its employees’ retirement funds). Amounts which are also excluded, include subsistence allowances, transport allowances, achievement awards, and overtime payments.
The effect of earning below the Basic Conditions of Employment Act earnings threshold is that there are additional statutory protections extended to the employee.
This includes, amongst other things, the fact that Employees who earn below the earnings threshold are entitled be paid additional amounts for overtime worked, and for work on Sundays and public holidays. It also includes the protections of the provisions of the Labour Relations Act on labour brokers, fixed-term employees and part-time employees.
Examples of these protections afforded to employees earning below the Basic Conditions of Employment Act earnings threshold, include the following:
- An employee placed with client by a labour broker, earning below the threshold, may be deemed to be the employee of the client for purposes of the LRA if he/she who performs work which is not a ‘temporary service’.
- An employee earning below the earnings threshold who is employed on a fixed-term basis for over three months, is deemed to be employed indefinitely if there is no justifiable reason for fixing the term of the contract.
